Luxury goods and services

KSF in Perfume industry

Session – 1
 Agenda
All about perfumes

Business Size

Key success factors

Emerging trends
What does luxury fragrance means?
High quality
materials

Performance
(longevity)

Storytelling

In store
experience

Customer
education

Personalized
service

Customization
 All about : Perfumes
Perfume Definition

• The word perfume used today derives from the Latin per fumum, meaning "through
smoke”

• Today perfume is a lucrative business where a brand image can be created out of an
emotional advertising campaign. No other product is so strongly related to emotions
and feelings as perfume.

• An unforgettable smell can remind you of a special situation for your entire life. This
is why many luxury brands like Dior or Chanel are producing most of their profit from
fragrances, the “cash cow” business.

• As a customer, even though you cannot afford a 3000€ dress from Dior, you can always
afford 50-100€ for a fragrance and taste a piece of the luxury dream.
 All about : Perfumes
Perfume Notes

Perfume is also described in a musical metaphor as having three sets of notes, making the
harmonious scent accord :
• Top notes (head notes): perceived immediately on application enabling initial impression of a
perfume
• Middle notes (heart notes): unpleasant initial impression of base notes, which become more
pleasant with time
• Base notes (deep notes): bring depth & solidity to a perfume. Compounds of this class are
typically rich and "deep" and are usually not perceived until 30 minutes after application
 All about : Perfumes
Perfume : Application

• Conventional application of pure perfume is at pulse points, so

that the pulse point will warm the perfume and release fragrance
continually where as the modern perfume industry encourages the
practice of layering fragrance so that it is released in different
intensities depending upon the time of the day.

Perfume : Association

• Perfume is strongly related to emotion and feelings of a person

which is used to convey personal identity (personification)
 Business Size : overall market
A fragmented and hyper segmented market – Perfumes

Revenue in the industry is forecast to reach an estimated Euro 24 billion in 2018 with a
CAGR of 4% over the next five years (2018-2023), highly influenced by increasing demand
in Asia Pacific
Business Size : overall market
Many segmentation criteria
Classic Vs Fashion fragrances

Designer Vs Niche fragrances

Emotional statement for women archetype (seduction Vs

elegance)

Scent (flowery vs spicy vs fruity vs light vs heavy)

Notes (Top notes : head notes; Middle notes : heart notes;

Base notes : deep notes)
 Business Size – prestige market
Worldwide luxury goods market by category

Innovation and new launches : growth levers of beauty

 Key success factors
Multinational, multibusiness and multibrands companies
with global brands & local strategies
Product: Strongly related to emotions and feelings
Pricing: related to the image of the brand
Communication: global image (managed by HQ) but glocal
advertising
Distribution: international and local (trade marketing activities
growing in importance)

80% of selective markets hold by 8 players: Estee Lauder, l’Oréal,

LVMH, P&G, Chanel, Shiseido, Coty, Clarins

 Key success factors
• Newness drives the industry
Main source of perfume revenues for designer brands
Perfumers now bring more than 300 new scents to market every year - more in a
single year than the total number of new fragrances introduced in the 1970s and
1980s combined, nevertheless classic scents account for 40% of total US dept
stores sales
Trend towards in-house control (LV, Burberry…) and made-to-measure scents
https://www.fredericmalle.com/
 Key success factors
Importance of R&D
Specialized solution providers for cosmetics and
fragrances https://www.youtube.com/watch?v=zRe0sLIZul0
 Key success factors

Distribution sets positioning

Mass
Selective
Direct sales
Concept stores/fashion stores
Spa
Internet
Travel related
 Trends
Innovation
Multisensory and strong products with emotional touch
Cross market development
Increasing use of natural/organic ingredients
Specialized perfumeries become more desirable
Rise of new and original retail concepts

New segments
Men
Emerging markets
Millennials

A mass market industry but… a tendency to niche and distinction

Niche and local brands and tailored services
 Trends
• New Channels gaining ground
Rise on e-commerce

Emotional drivers
Link between smelling good and confidence
Consumers remain interested in quality despite the effects of the
recession
 Trends
Importance of Branding
Fragrance manufacturers need to recognize the 'experience
economy'
Frequent fragrance users typically seek products that are both high
quality and of a reputable brand

Product choice depends on indicators

Fragrances are used on a daily basis
Sensory and value considerations are driving fragrance purchases
in the majority of markets worldwide
Consumer Motivation: improving desirability, personal happiness
and professional advancement

Ethicality and the use of Natural Ingredients

Growing demand for natural / organic products in most countries
Top 10 women fragrances (2012)
Top 10 men fragrances (2012)
 Exercise
You will have to research on the iconic perfumes of different
luxury brands and find how that perfume came into existence
(story telling)